Family business

A family business

From the point of view of shareholding, it is one in which a family has control of most of the shares and can make the most convenient decisions.

They are the organizations in which the capital and its government are in the hands of one or more families that exercise control, the majority of the votes in the assembly and in the board of directors are held by the family and a relative or several participate in the administration and corporate governance of the company.

In the world, family businesses are a strong pillar in the economy of nations, employing more than 80% of people. In Mexico, family businesses represent more than 80% of all companies.

Family businesses are made up of the first generation, which is the one that started the business, that is, the founding partners, the second generation, they are the sons of the founders and the third generation, they are the sons of the sons of the founders and so on.

There is a high failure rate of family businesses worldwide, of every 100 that are created, approximately only 30 reach the second generation and 10 the third.

The lack of a common mission is one of the main causes of disagreements, since each member of the family has their own idea of what the company should be.

An CEO of a non-family business stays on the job for 5-10 years on average, in the family business the average is 30 years.

Working in a family environment can be a comforting or frustrating experience at the same time, depending on the profile of the members of each family, since it can enhance or deteriorate the relationship between them.

The fact that family members work in the same company also allows domestic problems to be carried to work or vice versa.

It may or may not be convenient and it has its advantages and disadvantages.

You have to differentiate between a large family business and a small one since the roles of family members are different.

In some families, its members do not work in the company and do not manage it.

There are other companies in which several generations of the family are involved in high and strategic executive positions to have the control and administration of the company.

It is convenient for families to define the ownership structure, who will participate in the control of the administration, what will be the participation and succession of the new generations, define the content of the family protocol and how the appointment of external professional and trust.

Some points to consider to maintain family harmony and ensure the continuity of family businesses are the following:

Have a shared vision and mission. Have a strategic and business plan. Institutionalize and professionalize family businesses. Have a family protocol. Create corporate governments. Have a family council. Have succession plans for the presidency or general direction of the company..Prepare alternative life plans for family members who retire. Have career plans for family executives. Prepare a plan for the incorporation of second and third generations into the family business, establishing policies and conditions of entry. Have clear rules for the operation of the Board of Directors: Implement corporate policies, improve information systems, strengthen transparency, accountability and corporate social responsibility processes.Establish in the protocol policies of the way to dialogue or discuss different issues among the family members who participate in the company and seek joint solutions, avoiding having conflicts between them that affect the development of the business. Establish a dividend policy in the family protocol. the corporate documentation of all the companies of the family updated, documented and notarized.Establish the value of the company and update it regularly with experts. Have a comprehensive plan to maximize the value of the shares. Have experienced family and professional business advisers.

"Having a shared vision of family members increases coincidences and minimizes differences"

Corporate governance bodies

The main governing bodies of a family business are the shareholders' meeting, the family council, the board of directors and the general management.

Operating rules must be established for each governing body, defining roles, responsibilities and roles.

Generally, the members of the shareholders' meeting are the same as those of the family council.

Some family members also serve on the board of directors and occupy the most senior management positions in the company.

Business consultants from different specialties also participate on the board of directors to give their opinion on different topics.

Succession of the company president

The change of president in the company, by the natural succession of one to another generation in the family, is a necessary and complicated step for the company.

To facilitate the succession it is necessary to have expert managers who are dedicated to family planning to have a planned succession.

It is required to have a strategic succession plan, clearly documented in a family protocol, that contains contingency plans to face unforeseen circumstances that may put the continuity of the company and the family's assets at risk.

If the founder or president understands the importance of the succession process, it can be scheduled and carried out much more effectively.

If we empathize with the founder or president of a company, you can understand the fears that they have and that are natural in anyone when it comes time to think about succession and to give up the chair.

It is necessary that the founder understands the need to prepare the succession and that he is doing what is necessary to be prepared when that moment arrives.

Fears arise about what they may lose if they leave the company, such as prestige, power, loss of friends and even the authority figure in their family.

There are entrepreneurs who dedicate more time to the company than to their own life and that of their family, so it is normal that they have fears when they drop the command and let the new generations run the company.

For the succession process to be successful, the president must be convinced that it is time to start making the necessary movements so that all the details and times are foreseen to have a planned and organized retreat.

The most important thing about succession is knowing when to retire and, if the state of health permits, controlling through the board of directors, wealth, harmony in the family and profitability in the company.

The world evolves and the needs of companies change and at certain ages those changes are very difficult to assimilate and understand, so lengthening the term of succession may not be convenient for the company.

Generally, he continues to be part of the family council and may have a casting vote depending on each individual case.

The retiring family member must have a life plan to spend their time on things they like and have a financial plan to ensure that their financial needs are met without problems in the future.

It is convenient to establish a schedule to gradually transfer control of the administration and operation of the company from one generation to another.

If the founder or president runs his own estate, creates a legacy, transfers a dream, and leaves a successful business.

"Family friendliness is essential for the succession process to take place"

Successor Profile

It should be considered that the profile of the founder may be very different from that of the second or third generation family member of ACIE and in each case in particular the needs of the company and not someone who will take the position of president. It requires certain skills, knowledge, special attitudes and sensibilities and being convinced of the vision and mission to be an entrepreneur - family leader and there is not always the person with this profile among the possible candidates for successors of the family members. It is common that in the second or Third generation family members do not have the ideal profile, so they choose to hire a senior management executive, with experience and meeting the needs to successfully run the family business.Succession is a process of transfer of knowledge and relationships as well as development of capacities and attitudes that takes a long time, so possible family successors should have a process in their daily activities that over time allows them to have a comprehensive picture from all areas of the company.

When the ideal successor is from the third generation and there are members of the second generation who work in the company, but do not have the profile to occupy the position, the decision is complicated since it is difficult for them to accept that the son of one of the brothers be the president.

It is also difficult to decide the succession, when two of the members of the third generation, from different family branches, meet the profile to be the successor and the parents of each of them bow down so that their son occupies the position of president and complicates consensus and succession.

Therefore, many of the companies that reach the third generation are sold or disappear.

Family protocol

The family protocol is a confidential document, which must be prepared for the specific needs and circumstances of each family.

It establishes the general principles of action and behavior of the members of a family.

It reflects the will and commitment of family members to establish the rules and procedures of coexistence and harmony.

The strategies that the company must follow to have better profitability and sustained growth are defined.

It serves to establish the bases of the present and the future, the benefits and obligations of each heir, avoiding power struggles between family members.

It facilitates the incorporation of the following generations to the company, prepares the family for succession and ensures the continuity and success of the company with consensus and in a constructive way.

It allows the institutionalization of the company, fosters the unity of the family, cares for the interests of the partners and facilitates their long-term permanence.

It fosters harmony between family members based on respect, tolerance, empathy, accepting other points of view, listening and valuing the opinions of others, and having open, frank, transparent and honest communication.

It seeks to use the strengths and avoid the disadvantages that family businesses have.

It establishes the rules for decision making among family members.

It ensures that decisions are made based on the needs of the company and not on any member or family branch.

It is very useful to implement a protocol for the family that is followed, in order to achieve professional direction and administration.

It is convenient for the family protocol to be referred to in the company's bylaws, be protocolized before a notary and the stated family agreements are protected.

"Formality is necessary and contributes to the growth and development of the family business"

Family and Business Consultant

For family companies, having a business and family consultant, specialized in generational successions, is no longer a luxury, but a necessity and is more necessary when the second and third generations are involved and they have growth plans.

A good family consultant provides advice, tells family members the way it is, has the primary purpose of building family unity, and can focus the family on guiding their efforts to fulfill the company's vision and mission.

The consultant must supervise the development of systems, plans and policies that guarantee a solid society and the institutional growth of the company.

Extensive business experience and the sensitivity to relate to family members is essential to the success of family consulting.

A specialist is required to elaborate the family protocol with the family members.

You can hire a family and business consulting company for a monthly fee or set a work hour fee.

The fees of an experienced consultant are generally high.

"Family members must visualize the continuity of the company, always preserving the values and principles of the family"

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Jack Fleitman:

www.ciemsa.mx professional consultants

@jackkmex